Too Big to Fail vs. Small Businesses Set Up To Fail

Dodd Frank and the Small Business – the collateral damage. I have a client, a typical small business. They make a decent living for the owner, and pay the salaries of a bunch of ordinary people. They are part of the small business world that contributes more than 40% of the GNP of the United States. They have a contract to provide services to a Big Bank. They do not provide financial services, they provide a service akin to janitorial services, food services, delivery services etc. This week they were asked… well really they were required as a condition to keep their contract, to sign what’s called a Remediation Letter. It has lots of big words and words that are capitalized because they are being used in very unique and idiosyncratic ways. So my client wrote to me and said “Nina, what does this mean?” I read the big words and capitalized words and sentences that ran on and on… and on. And what it meant was: “If Big Bank steps in doo doo and doesn’t pay you at all, you have to keep providing services for up to 18 months… no matter what. I understand that it’s important to the US economy that large financial institutions have a emergency plan in case of disaster.  As the SEC has termed it – financial institutions need a “living will.”  But apparently the ability of any large financial institution that is failing to carry-on will be on the backs of the small businesses that are not too big to fail.

Crowdfunding: The answer to the eternal question of the Underpants Gnomes

The answer to the eternal question of the Underpants Gnomes is …. drum roll please…. Crowdfunding! Imagine this: it’s 3:00am. You have an idea.  Oddly, you remember it at 7:00am when your alarm rings. Amazingly you still remember it at 6:30pm when you get home. You rush to your computer and describe your idea. You offer people a chance to invest in your idea for as little as $100.00.  Overnight you raise $1,000,000.  You go in to work and quit your job.


  That’s often the vision of crowdfunding.  But slow down, buckaroo, it’s not that easy.   Crowdfunding has two main categories: reward and equity.
  Reward based crowdfunding means people on the internet can “buy” a reward, like perhaps a change to attend an opening of a show, or get a first edition of a product. Once you get your reward, you have no further interest in the company – you don’t own any part of it.   Equity based crowdfunding means you are buying a “security” which is often a direct, if minuscule, ownership interest — the most common being stock. But you could also get a bond, or a note or a “membership unit.”   Equity based crowdfunding is a highly regulated process. You may have heard it that it is easier and cheaper than traditional investment paths – but that doesn’t mean it’s easy or cheap.  There are still many many regulations with which you must comply.  And at the end of the day – you have people who’ve paid to be part of your company. It can be like inviting a very large number of in-laws into your home. They can be very intrusive.   On the other hand, if well conducted, a crowdfunding campaign can be a much needed infusion of early capital into a company.  

Complying with COPPA (Children’s Online Privacy Protection Act)

  If you have a web presence that is directed to children under 13, and there’s even a chance you might now or in the future collect personal information from them, you much comply with COPPA.  The FTC has a short and easy to follow Compliance Plan for COPPA covered businesses.  It’s a quick and important read. Let me know if you have any questions once you’ve gone over it.

Sick Leave – Is your California Business Complying with the Paid Sick Leave Laws?

California Paid Sick Leave Are you compliant? In September 2015 all California employers, even the smallest ones, were required to give paid sick leave to employees.  The law allows two different programs. Under one program, you can have sick time accrue over time so very short term employees get very little paid sick time off. But under this program, the sick time carries over to future years to some extent.  The other program gives employees the full 3 days up front, but the days can’t be carried over. However, if you’re in Berkeley, San Francisco, Oakland, Emeryville, Los Angeles, San Diego or Santa Monica you have special city laws with which to comply also. Here’s a link to a handy charge (as of December 2016) of the state and city laws concerning sick pay: California Chamber of Commerce Sick Leave Chart. I’d check back with that chart because other cities are bound to come up with new laws of their own.